MBW Views is a sequence of unique op/eds from eminent music trade individuals… with one thing to say. The next comes from Kim Bayley, Chief Government of the UK-based Leisure Retailers’ Affiliation.
When the chief of essentially the most highly effective music firm on the planet speaks out, it is smart to concentrate, and accounts of Sir Lucian Grainge’s latest deal with at Common Music’s Capital Markets Day presentation made fascinating studying for streaming companies and retailers particularly.
Grainge’s feedback present a constructive perception into the evolving relationship between report firms and their “go-to-market” companions, however level to at the least one vital potential space of stress.
The important thing and opening soundbite of Grainge’s deal with to buyers was clear: “Streaming has resulted in a quantum leap ahead in music entry and monetization and streaming will proceed to propel a few years of trade development.”
As Sir Lucian acknowledged, the one most essential driver of report trade revenues is now the success of streaming companies in driving subscription earnings.
“nobody takes out a streaming subscription simply because a selected artist is releasing a brand new album.”
What was lengthy the core competency of report labels, breaking new artists, has an ever-lessening bearing on the trade’s monetary fortunes. New releases are important to creating engagement on streaming platforms and producing bodily gross sales, however financially, their significance is proscribed.
Put it one other manner: nobody takes out a streaming subscription simply because a selected artist is releasing a brand new album.
In worth phrases – factoring within the affect of the inclusion of higher-priced bodily codecs – the highest 4 albums of 2023 mixed accounted for barely 1% of UK recorded music revenues.
Catalogue is extra essential than ever earlier than, high-profile chart hits generate much less money than ever earlier than, and the core marker of success for recorded music is the amount and worth of streaming subscriptions.
That is vital as a result of it marks an inexorable change within the steadiness of energy between report labels and the streaming firms, which now generate the majority of their revenues.
Streaming firms usually are not mere “retailers” – they’re market makers.
Traditionally, report firms lengthy held the whiphand of their relationship with their retail companions, they usually weren’t above utilizing their energy.
The extra equal energy relationship between labels and their retail companions that streaming has created is, I imagine, fostering a way more cooperative music enterprise during which either side sees a mutual profit in serving to one another develop and flourish.
We’re equal companions with either side having its personal core competency – report firms supplying music and streaming firms driving revenues.
A mutual recognition of those complementary strengths seems like a stable foundation for a constructive relationship.
Sir Lucian is on the cash: we must always not restrict followers’ capability to specific their ardour for music to only £11.99 a month. Many need to spend extra – to get extra. The important thing query is how that demand is best-satisfied.”
Doubtlessly extra problematic is the opposite focus of Sir Lucian’s deal with: the chance to raised service “superfans” of particular person artists with extra focused and higher-priced items and companies.
ERA can declare some observe report on this space. Again in 2018 we recognized in a weblog for MBW the necessity for the trade to nurture (even treasure) its superfans.
We adopted this up in 2022 with a groundbreaking analysis research on fandom which gratifyingly pointed to a lot of alternatives highlighted in Common’s investor day programme final week.
Sir Lucian is on the cash: we must always not restrict followers’ capability to specific their ardour for music to only £11.99 a month. Many need to spend extra – to get extra.
The important thing query is how that demand is best-satisfied.
The plain reply is retailers. Simply as streaming companies did the heavy lifting of returning the recorded music trade to monetary well being within the digital area, so it was Excessive Avenue retailers who first found the re-emerging demand for vinyl and helped set it on its path to turn out to be the income generator it’s at the moment.
The simmering D2C dialog…
Historical past exhibits that report firms want entrepreneurial intermediaries to successfully attain the buyer. These will be established retailers or the brand new breed of direct-to-fan intermediaries.
There may be an alternate view, nonetheless, and one alluded to by Common CFO Boyd Muir in the identical investor day presentation.
Muir revealed that Common’s personal D2C enterprise is now producing €548m from 1,300 particular person shops – round 5% of UMG’s complete income.
From a margin perspective, reducing out your retail clients to promote direct clearly has vital benefits, however it’s not essentially a path to market development.
“A mutual recognition of one another’s strengths will probably be key to actually take advantage of the superfan alternative, simply as it’s in streaming.”
Simply assume again to 2012, the historic low-point for vinyl. At that stage report firms had been busy furiously deleting as a lot vinyl as they may. It took the hive thoughts of third-party retailers – on this case indie shops – to find a possibility in adversity.
And so I imagine it would show with D2C and the pursuit of the superfan. Simply as Sir Lucian now acknowledges, it’s intermediaries – beforehand generally known as retailers – who’re best-placed to drive income from shoppers.
A mutual recognition of one another’s strengths will probably be key to actually take advantage of the superfan alternative, simply as it’s in streaming.
On the subject of Superfans, nobody is aware of how greatest to interact them than the knowledgeable retailer.Music Enterprise Worldwide
